Earnings Roundup: Perot Systems tops estimates

Perot Systems Corp. (NYSE: PER) announced Tuesday that earnings for its third quarter were 11 cents a share, right on target with estimates. The results, however, were down 8 percent sequentially.

Shares in the consulting and services company closed down 0.38 to 9.56 Monday.

"Faced with significant declines from three of our four largest contracts as well as a soft project market, the Perot Systems team rallied together to produce contract signings that have positioned us to emerge as a stronger company," said Ross Perot, Jr., president and CEO of Perot Systems.

Contract signings for the third quarter totaled $309 million. Growth from third quarter contract signings, combined with 5 percent sequential growth from project and consulting services, increased third quarter revenue to $276.1 million, a 3 percent sequential increase over the second quarter.

For the third quarter, losses from equity investments were $0.5 million, a $1.7 million sequential decline from the second quarter. This decline is attributable to losses associated with Perot Systems' newly formed B2B electronic bill presentment and payment venture.

Based on recent and expected contract signings, Perot Systems expects fourth quarter revenue to increase by 3 percent to 5 percent over third quarter sales. Earnings are expected to be between 12 cents and 13 cents a share. The company expects that by the second quarter of 2001, it will return to 15 percent to 20 percent year-to-year growth rates.

The company also initiated a stock repurchase program Tuesday. "With a market capitalization of only four times our cash balance and our prospects for growth, we believe our stock represents a compelling value," Perot said in a statement.

Also reporting results Tuesday was Mpower Communications Corp. (Nasdaq: MPWR). Net loss per share was $1.60, a dime narrower than First Call's expected loss of $1.70 a share

Shares in the provider of broadband data, Internet and telephony services to business customers closed down 0.34 to 6.56 Monday.

Mpower's EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization and non-recurring network optimization cost) loss was $49.4 million for the quarter. Gross margin was $4.5 million, or 10 percent of revenue. EBITDA on a normalized basis for the quarter (without one-time adjustments) was a loss of $55.6 million. The company took a $12 million one-time charge in the quarter associated with network optimization costs.

Revenue of $45.9 million was up 206 percent over third quarter 1999 revenue of $15 million, and up 49 percent sequentially over the second quarter of 2000. Normalized core revenue (without one-time adjustments) was $39.7 million.

NetEase.com, Inc. (Nasdaq: NTES), an Internet company supporting China's Web sites, reported third quarter net loss of $ 5.02 million or 17 cents per ADS (American Depository Share). First Call did not have a consensus estimate for the company.

Revenue for the quarter was $2.55 million , up 539 percent over revenue of $400,000 in the third quarter of 1999, and a 47.4 percent increase over second quarter 2000 revenue.

As of the end of the third quarter of 2000, registered users were 9.26 million, up 482 percent over the 1.59 million users at the end of the third quarter of 1999. Advertising revenue growth also continued to be strong and the company said it expects advertising services revenue to continue to grow into the fourth quarter and year 2001.

In the third quarter, NetEase launched a branding campaign that caused a portion of marketing expenses to be shifted to the second half of 2000. But even with the new branding campaign, for the full year 2000 marketing costs will be less than originally planned, the company said.

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